Extremely strong demand in China and India particularly helped to cushion this fall

Gold sustained a fall of $78 (on a fi xing basis) or just over 5% during January under investor liquidation and a build-up of short positions as a result of improving economic confi dence. Extremely strong demand in China and India particularly helped to cushion this fall. This demand is now on the retreat, pointing to the likelihood of further price falls in February.

Conditions are likely to be volatile given the frequent shifts in the economic and political environment, with tests of $1,300 a possibility, although we adhere to our medium-term bullish stance.

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